Here we established an efficient system for differentiation, expansion and isolation of hepatic progenitor cells from mouse embryonic stem (ES) cells and evaluated their capacity to repopulate injured liver. Using mouse ES cells transfected with green fluorescent protein (GFP) reporter gene regulated by albumin (ALB) enhancer/promoter, we show that serum-free chemically defined medium supports formation of embryoid bodies (EBs) and differentiation of hepatic lineage cells in the absence of exogenous growth factors or feeder cell layers. The first GFP+ cells expressing ALB were detected in close proximity to "beating" myocytes after 7 days of EB cultures. GFP+ cells increased in number, acquired hepatocyte-like morphology and hepatocyte-specific markers (i.e. ALB, AAT, TO, and G6P), and by 28 days represented more than 30% of cells isolated from EB outgrowths. The FACS-purified GFP+ cells developed into functional hepatocytes without evidence of cell fusion and participated in repairing of diseased liver when transplanted into MUP-uPA/SCID mice. The ES cell-derived hepatocytes were responsive to normal growth regulation and proliferated with the same rate as host hepatocytes after an additional growth stimulus by CCl4-induced liver injury. The transplanted GFP+ cells also differentiated into biliary epithelial cells. In conclusion, a highly enriched population of committed hepatocyte precursors can be generated from ES cells in vitro for effective cell replacement therapy. We studied the involvement of c-Met signaling in the activation of liver stem cells. For this purpose we used a model of chronic liver injury induced in mice by diet containing the porphyrinogenic and cholestatic agent, 3, 5-diethocarbonyl-1,4-dihydrocollidine (DDC). Previously we and other investigators demonstrated that activation of the liver stem-cell compartment is essential for liver regeneration in DDC-treated mice. DDC-treated MetLivKO mice do not show a compensatory increase in liver mass is due to imbalance between hepatocyte proliferation and apoptosis. Extensive damage to and impaired functional capacity of c-Met-deficient hepatocytes are corroborated by elevated serum levels of AST, ALT, direct bilirubin, and bile acids. By 6-8 weeks after beginning DDC, most of the MetLivKO mice develop severe cholestasis and die from liver failure, whereas all Cre-Ctl mice survive this treatment. The most striking observation in this work is almost complete absence of oval cell proliferation in MetLivKO mice. Instead, c-Met-deficient livers show typical bile duct proliferation which is confined to the limits of portal tracts. In contrast, DDC-treated Cre-Ctl mice develop an extensive network of ductular oval cells which migrate into the periportal parenchyma, as is demonstrated by confocal microscopy using the oval cell-specific antibody, A6. Foci of small, newly formed hepatocytes that express A6 antigen are found in close proximity to oval cells only in livers of Cre-Ctl mice. These results show that loss of c-Met function in hepatocytes not only impairs regeneration of the liver from hepatocytes, but also blocks stem cell-mediated liver regeneration.